Francis Maude said the current legal protections for staff were "simply untenable"

More than half a million civil servants will have redundancy pay slashed under new moves to tackle the deficit, the Government confirmed today.

Minister for the Cabinet Office Francis Maude said the current legal protections for staff were "simply untenable" as he announced fresh legislation to cap pay-offs.

Civil servants across Whitehall — and in big regional departments such as Work and Pensions, Revenue and Customs, the Ministry of Defence and Ministry of Justice — have a legal right to redundancy terms which can be worth more than six years' pay.

Under the new regime, all compulsory redundancy payments would be capped at one year's pay and voluntary redundancies at 15 months' salary.

Mr Maude said he had been forced to act by the "current economic climate" and because the PCS union had taken court action to defend the system.

He also signalled a wider drive for regional pay rates across the civil service in a challenge to national pay bargaining with trade unions. While the civil service has London weighting to reflect higher housing costs, full-blown regional pay rates have rarely been tried. Public sector pay in the regions is about five per cent higher for men and up to 13 per cent higher for women compared with the private sector.

If Mr Maude is successful, the coalition could try to dismantle national pay bargaining for teachers, nurses and other public sector staff. Any such moves would be resisted by the unions.

Varying regional pay could be used to fill shortages in areas that have difficulty hiring people.

Mr Maude today said that he would prefer to proceed by negotiation with the unions but was determined to get the changes through. "Our system of a permanent politically impartial Civil Service is one of the jewels in our constitution and it is rightly admired throughout the world Sadly the huge deficit we inherited means there is a real urgency now for change," he said.

"What is on offer now is simply untenable and completely out of kilter with what is on offer in the wider public sector and the private sector. Our ambition now is that a negotiated, sustainable and practical long-term successor to the existing scheme can be agreed — one that is flexible and appropriate for current economic climate and also fair for lower paid workers."